Petition for a Writ of Certiorari — Watson v. Massachusetts Mutual Life Insurance Co.

In Tue

Supreme Court of the United States

Ocroper Tenn, 1945

No.

Warren Scotr Warson, Petitioner,

VS,

Massacuusetts Mutvuau Lire Insurance Company,

a Corporation, Respondent.

No.

KenNEtTH Nicout Watson, Petitioner,

US.

Massacuuserts Murvuau Lire Iysurance Company,

a Corporation, Respondent.

PETITION FOR WRITS OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA

Sern W. Ricttarpson

Aurons B. Lanpba

Raymonp C, Cusuwa

Warren EK, Macee

Washington, D.C.

Of Counsel: Attorneys for Petitioners

Davis, Ricnserc, BreEse,

Busick & Rich arpson

Mager, Beepy & McGovern

Washington, D.C.

isa soeeiemmrimenieiememmeerncnenene taeeecereemremiereeemeamieruminmmemaeieeeeieeeemeen eel

PRESS OF JUDD & DETWEILER, INC., WASHINGTON, D. C,

(RBEPE ORE RS EE WA elk RRM HH

a Pe

INDEX

Page

PROCESS TONE GARIN OL OOROMONUNEN D5. 5.25 a2! Sonics aiiirk dese his Ved oie eee ke 1

ANNE PRT MNDS MER 55 aa. Cie sow tie when ELPNES De pn clea a ek 2

PONE re SX wa emirate kek Mere VEER CLONER SOC Clee ReE 2

ERMA MEA PUNIOMRUR 0) Nore Moo Sas c Mewhia gee GWalkgh Sea kee Se hale eoee 2

GUI ITEN POUMMRI ao oe los atkieia sts ih ec Wwicinve nea henna keSie RO ea AS 7

FRAME 08 ORS WOE SIOIN 56 in opal dace Sales Sve aN Pes es 8

— Heer dur": AES Sey reel gs rll a rt enn ne Oot ert 8

. The Court of Appeals has decided a question of general im-

portance, which has not been, but should be settled by this

MEN 6-55" 02s ssa b brneSasalo bs Kio ech Raa e. Pace ec REST ee Leas 9

II. ae Court of Appeals has rendered a decision in conflict with

— ae of other Circuit Courts of Appeal on the same

Victbaic Sh nieces namie eek ira Gate are en etan een ete cit on 12

Ill. The Coat of Appeals’ decision has not given proper effect to

and conflicts with the applicable decisions of this Court. . 18

EIDE RII es. 5 5.5 Fae inc SONS sore Sees Pee PRD Ce PMSA SPIO eer ee nee 23

TABLE OF CasEs CITED.

Alabama Life Insurance Company v. Garmany, 74 Ga. 51... 00.00.0000... 11

American Life Insurance Co. v. McAden, 109 Pa. 399.................... 11

Batouvet Gh. :-v: Bienes, Laie BAGSS. BO 6 cco sis ons 05 ose ve wd vs kee 0 OOo oR as 11

a Casually Exchange v. Ford Elkhorn Coal Co., 48 8. W. 2d 1057

EMMIS oo Win 0 Gk ah had Sota een Aaa epee AEs oe AE 11

Black v. Supreme Council, American Legion of Honor, 120 F. 580.......... 15

Brough v. Presidential Fire & Marine Ins. Co, 1iG 86. GOb (LA): «5... 11

Central Trust Co. v. Chicago Auditorium, 240 U. EL ANCES, Saat eet eee ee 22

Davies v. Sun Life Assur. Co., 2 F . Supp. 1a, ROU BER PERE coat nerd eG OR 16

Eminent Household of Columbian Woodmen v. Bryant, 200 8. E. 321 (Ga.).. 11

Erwin v. World Mut. Health & Accident Ins. Co., 186 Atl. 260 (Pa.)....... 11

GCSGOM: Vs LOWRIE, cate sO So Sig Sars iota awk ibe aow elcid So

Harwood v. Security Mut. Life Ins. Co., 161 N. E. 589 (Mass.)............ 11

Industrial Life & Health Ins. Co. v. Thomas, B60 SD. E; S80 (G6.)i. 65 11

Life & Casualty Ins. Co. v. Baker, 798. W. 2d 36 (Tenn.)................ ll

Life & Casualty Ins. Co. v. Womack, 3 8. ae TE NOMB cs oon 060s yrcic ewe 11

McKee v. Phoenix Insurance Co., 1 "epee ene yes 11

Michaelson v. Security Mut. Life Ins. Co., ish F. 356, cert. den. 207 U.S. 588. 15

Mobley v. N. Y. Life Ins. Co., 295 U. Ep aeriap 10,11 ,16,17,18

Mutual Relief Ass’n. v. Ray, 292 S. W. 396 (Ark.).................000005 11

National Life & Accident Ins. Co. v. er 98 S. W. 2d 107 (Tenn.).... }

New York Life Ine. Co. v. Statham, 93 U.S. 24. . 2... ccc cece eveseees

N. Y. Life Ins. Co. v. Viglas, 297 U.S. 672. ritvon 20,00 165823. 23

Pierce v. Liberty Life Ins. Sa 242 Pac. 133 (Kan. :e rian k ee ea

On a ere ae. Sa eee gta eon aS avis ue iain puree ME 22

Security Life Ins. Co. v. ‘Malthouse e i Uk Ea ae erase eae 11

Sinith ¥. Benard, VA Pak. DE, ee Us Te BOs cess sea kls swsieiinccuewiweecucs 12

Supreme Council A. L. H.v. Black, 123 F. pm cert. den. 191 U.S. 568..... 13

Supreme Council, A. L. H. v. Daiz, ol Dit | NEESER RR ONE Sara tras ene a 15

Thompson v. New York Life Ins. Co., 28 Song 628, 1: an 11

Union Central Life Insurance Co. v. Pottkor, 33 Ohio 459, 31 Am. Rep. 555.. 11

Van Werden v. Equitable Life Assur. Society, 68 N. W. 892 COW). oo 0ccca 11

Williamson v. Mutual Benefit Health and Accident Ass’n., 100 F. 2d 264.... 15

STATUTE.

Section 240 of the Judicial Code as amended by the Act of February 13,

1925

MISCELLANEOUS.

Vol, 7, Couoh on. Inaurante, Section AIO... ...< 6 cc caw dves vans ve cdsens 16

—1459

s

wk AA i a ae

In THE

Supreme Court of the United States

Ocroser Term, 1943

No.

Wa ter Scotr Watson, Petitioner,

vs.

Massacuusetts Muruau Lire Insurance Company,

a Corporation, Respondent.

No.

Kennetu Nicot, Watson, Petitioner,

vs.

Massacnusetts Mutua Lire Insurance Company,

a Corporation, Respondent.

PETITION FOR WRITS OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA

Petitioners, Walter Scott Watson and Kenneth Nicoll

Watson, respectfully pray for Writs of Certiorari to review

the decision (R. 25-30) and judgments (R. 31) of the United

States Court of Appeals for the District of Columbia, en-

tered on December 20, 1943, on rehearing, affirming the

la

9

a

judgments (R. 5, 18) of the District Court of the United

States for the District of Columbia, sustaining motions of

respondent, an insurance corporation, to dismiss the peti-

tioners’ respective complaints for recission and return of

certain premiums of insurance.

THE OPINIONS BELOW

The District Court filed no opinion when it dismissed peti-

tioners’ complaints. The first opinion (R. 18) of the Court

of Appeals was entered June 30, 1948, and is not yet re-

ported. The second opinion (R. 25-30) of the Court of Ap-

peals, on rehearing, was entered on December 20, 1948, and

is not yet reported.

JURISDICTION

The final decision and judgments of the Court of Appeals

were entered on December 20, 1944 (R. 25-30, 31-32). This

Court, for good cause shown, on March 20, 1944 granted

petitioners to and including April 19, 1944 within which to

file this petition for certiorari (R. 35). The jurisdiction

of this Court is invoked under Section 240 of the Judicial

Code as amended by the Act of Febrnary 13, 1920.

SUMMARY STATEMENT

This case presents for correction errors of the District

Court of the United States for the District of Columbia,

erroneously affirmed by the United States Court of Appeals

for the District of Columbia.

The case comes up on motions to dismiss petitioners’

com laints; therefore, all of the facts alleged in petitioners’

complaints are conceded.

Petitioners each filed a complaint in the District Court

against respondent corporation, a Massachusetts insurance

company doing a life insurance business in the District of

pais

3

Columbia (R. 1-4, 9-12). The facets alleged in each com-

plaint are identical, except for the amounts of premiums

paid (R. 38, 11), and are as follows:

Petitioners were desirous of obtaining policies of Jife in-

surance on the life of one William EK. Richardson, who was

indebted to the petitioners (R. 2, 10). Richardson was

agreeable to the issuance of such policies, but took no part

in the negotiations for such insurance (R. 2, 10). Those

negotiations were carried on by petitioners and respondent

insurance corporation (R. 2, 10).

Petitioners requested of respondent insurance corpora-

tion absolute life insurance policies on Richardson’s life,

naming petitioners irrevocably as beneficiaries (R. 2, 10).

Petitioners were willing and offered to pay all the premiums

of such insurance (R. 2, 10).'| Respondent corporation re-

fused to issue the requested policies, but represented to

petitioners that respondent corporation would issue a policy

of life insurance in each instance, payable to the estate of

Richardson, and would accept from Richardson absolute

assignments of such policies to petitioners, thereby making

petitioners the sole owners of all right, title and interest in

and to the policies and thereby accomplishing the same re-

sults as would have been created had the policies named the

petitioners as beneficiaries (R. 2, 10).

Petitioners believed respondent’s representations and

in reliance upon them obtained policies on the life of Rieh-

ardson, payable to his estate, and shortly after their issu-

anee Richardson absolutely assigned, under seal, to the

petitioners, for value received, all right, title and interest

in and to these policies (on an *‘Absolute Assignment”

form supplied by respondent) respectively (R. 2-3, 10-11).

' Life insuranee by a creditor, taken out on a debtor’s life, is valid and

can continue in full foree and effect after the debt is paid. Grisby v,

Russell, 222 U. S. 149.

4

Those absolute assignments were filed with and accepted

by respondent (R. 3, 11).

Petitioners received from respondent corporation the

assigned policies, received all notices thereunder and paid

all premiums thereon. In fact, the insured Richardson

never participated in the negotiations and never had the

policies in his possession (R. 3, 11).

In reliance upon respondent’s representations that peti-

tioners were the absolute owners of such policies, just as

if named originally as beneficiaries, petitioners paid

$1,871.10 and $1,940.40, respectively, to respondent as

premiums (R. 3, 11).

Thereafter, respondent advised petitioners that respond-

ent never considered petitioners to be the owners of those

policies of insurance, and that petitioners never had abso-

lute assignments of the policies because respondent always

considered such assignments as collateral only (R. 3, 11).

As respondent’s position now is that, notwithstanding its

agreement to the contrary, it never recognized such assign-

ments, that complete and final repudiation relates back to

the inception of the contract and is a breach ab initio (R.

3, 31).

Petitioners, having bargained with respondent corpora-

tion for life insurance policies over which they had absolute

control as the owners thereof, and, as respondent had agreed

to so contract with the petitioners, such repudiation by re-

spondent was a willful and complete breach of that contract

before the time of performance (R. 3-4, 11-12).

On such repudiation and breach altogether by respondent,

petitioners elected to consider their policies rescinded and

demanded the return of the premiums paid by them to re-

spondent (R. 4, 12).

Respondent refused to return the premiums paid and

petitioners instituted actions below, alleging the foregoing

pis SOS ta io

0

facts, to recover such premiums and interest (R. 1-4, 9-12).

Respondent corporation moved to dismiss — of peti-

tioners’ complaints on the single ground, i. e. ‘failure to

state a claim’? (R. 4, 13),

The Distriet Court granted respondent’s motions to dis.

miss and dismissed petitioners’ complaints (R.5,13). That

court filed no opinion with the orders of Rieck

Appeals were duly perfected by petitioners to the United

States Court of Appeals from the orders of dismissal of the

Distriet Court (R. 6, 7; 14,15). Those appeals were con-

solidated in the Court of Appeals (R. 17).

On June 30, 1948, the Court of Appeals, in a ‘*Per

Curiam”? opinion, affirmed the District Court on the theor y

that the complaints did not show that the misrepresenta-

tions of respondent were material to the insurance protec-

tion for which petitioners paid premiums. No authorities

were cited to support the court’s decision (Rt. 18).

Petitioners duly filed a petition for rehearing in the court

below (R. 19-22), pointing out that, under respondent's

wilful is Sones and wrongful relegation of petitioners’

policies into a ‘‘collateral’’ status, payment of the debt

owed by Richardson to petitioners would cause the policies

to revert to Richardson’s estate or lapse, notwithstanding

that petitioners had paid all premiums for the e xpress pur-

pose of buying absolute life insurance policies with the

principal amounts thereof absolutely payable to petitioners

on Richardson's death. Therefore, petitioners showed it

Was error for the court below to argue that petitioners re-

ceived some kind of ** protection’? not defined and not bar-

gained for, and because the value of unde ‘fined and unpur-

chased ** protection”’ was not alle ‘ged, sustain the dismissal

of petitioners* complaints.

The court below, realizing that its first opinion was

untenable, granted a rehearing (R. 23), a further argument

2a

6

(R. 24) and on December 20, 1945 filed a second opinion

(R. 25-30).

The opinion below, on rehearing, in effect, concedes that

the premise of the first opinion was untenable. In so many

words the court below on rehearing concluded that it would

‘follow the cases which permit a creditor's policy to be en-

forced independently of the debt which gives rise to his

insurable interest’? (R. 28).

Then the court below held that “The allegation that the

insurance was taken out for the purpose of protecting exist-

ing indebtedness makes a prima facie case in favor of the

validity of the contract”’ (R. 28).

““Therefore’’, the court below concluded ‘the allegation

that the defendant refused to recognize the terms of the

agsignment to the plaintiff, which it had previously ac-

cepted, is sufficient to charge a breach of contract 7 (3. Zo).

By an understatement of what the complaints alleged?

the court erroneously argued that the breach did not war-

rant a return of the premiums paid when petitioners elected

to rescind, on the theory that life insurance ‘tis a series of

contingent obligations to pay if death occurs during the

year covered by each successive premium’ (R. 28-29).

2 The court below says (R. 26) “Relying on defendant's representations

that the assignment gave him the interest is purported to transfer, plaintitl

as * premiums during a period of years. After these premiums

had been paid, defendant advised plaintiff it did not consider him the owne!

of the policy, that the assignment was not absolute but collateral only.”

But the complaints go further (Compare R. 2-3, R. 10-11). They allege,

not only reliance upon respondent's representations that the assignments

vested absolute ownership of the policies in petitioners, that petitioners

paid premiums relying thereon, but state in Paragraphs 10 and 11 (Kt.

3-4, 11-12):

* * * * * . .

10. That defendant now advises plaintiff that they never considered

plaintiff the owner of said poliey and that plaintiff does not have,

and never did have, an absolute assignment of said policy, but that

defendant considers sueh assignment as a collateral assignment only;

lee

ice aa

ee

While the court below conceded that petitioners could sue

to recover damages for the breach, and that the complatits

did state causes of action for damage S(R. 28), because pe ti-

tioners had prayed for more damages than they could re-

cover, the court below held th complaints were properly

dismissed (R30),

Petitioners sought another rehearing for manifest errors

(R. $2) but their petition was denied, without opinion, on

January 7, 1944 (R. 32).

On Mareh 20, 1944, this Court, for good cause shown,

granted petitioners to and ineluding April 19, 1944 within

which to file this petition for certiorari (R. 35).

QUESTIONS PRESENTED

(1) Where a party contracts for a poliey of insurane:

on the life of a debtor, and obtains such a policy as the abse

lute owner by agreement with an insurance company under

an absolute assignment from the debtor (furnished by the

insurance Company), pays premiums in reliance upon the

company’s representations that the assignment conferred

absolute ownership to the creditor—assignee, and there

after the insurance company repudiates its agreement and

refuses to recognize the assignment as absolute and asserts

11. That the plaintiff bargained with the defendant for a poties

over which he would have absolute control because of sole ownership

thereof and that defendant agreed to so contract with the plaintitl

and that defendant has breached its contract with the plaintiff by

refusine to recognize plaintiffs full and complete ownership of said

Pulley

Such allegations allege an absolute and final repudiation of its contract

by respondent, coupled with an allegation that respondent now states if

never recognized petitioners’ assignments. A more complete and final

repudiation, as distinguished froma breach not involving complete repudia-

tion, is difficult to comprehend. In effect, that repudiation beeause ot its

Very completeness relates back and becomes a breach ab initio, warranting

rescission by petitioners.

8

that it never recognized the assignment, except as ‘‘col-

lateral’’ to secure the debt, may the other contracting party

b . z .

(the assignee) treat such a wilful and final repudiation as a

breach of the contract altogether rescind and recover the

t ’

premiums paid?

(2) Do not such facets, involving a wilful and complete

repudiation dating back to the inception of the contract,

support a breach ab initio, rather than a present and partial

breach, warranting a rescission by the guiltless party?

(3) !s a complaint for damages alleging such facts and

praying for a judgment for the amount of premiums paid

and interest, subject to dismissal for ‘failure to state a

claim’’?

ASSIGNMENT OF ERRORS RELIED UPON

The Court of Appeals erred:

(1) In affirming the judgments of the District Court sus-

taining respondent corporation’s motions to dismiss peti-

tioners’ complaints, each for ‘‘failure to state a claim.”’

(2) In affirming the judgments of the District Court dis-

inissing petitioners’ complaints.

REASONS FOR GRANTING THE WRIT

Several of the reasons usually and generally considered

by this Court as a basis for certiorari are present in this

case.

I. The Court of Appeals has decided a question of gen-

eral importance, which has not been, but should be, settled

by this Court and has decided that important question con-

trary to the great weight of the authorities.

II. The Court of Appeals has rendered a decision in con-

flict with the five decisions of other Federal Cireuit Courts

of Appeal on the same matter.

See ee

pte

ene

9

III. The Court of Appeals’ decision has not given proper

effect to and conflicts with the applicable decisions of this

Court.

THE COURT OF APPEALS HAS DECIDED A QUESTION

OF GENERAL IMPORTANCE, WHICH HAS NOT BEEN,

BUT SHOULD BE SETTLED BY THIS COURT

Petitioners each sought of respondent corporation an

insurance policy on the life of their debtor, William E.

Richardson. Respondent refused policies on Richardson's

life payable to petitioners for reasons unknown to peti-

tioners. Instead, respondent suggested that the same. re-

sult could be obtained by having Richardson take out

policies on his own life, make them payable to his estate, and

for petitioners to take from Richardson absolute assign-

ments of the policies.

Respondent represented that it would recognize those as-

siguments as absolute, vesting full and absolute ownership

in petitioners.

Relying upon respondent’s representation that peti-

tioners would be the absolute owners of such policies under

such assignments, the policies were taken out and absolutely

assigned by Richardson to petitioners.

Thereafter petitioners paid the premiums on such policies

for about eight years, relying upon respondent’s repre-

sentations,

Respondent corporation thereafter repudiated its con-

tract with petitioners and stated it never recognized the

assignments as absolute,* and always considered sueh as-

signments as collateral to secure the debt. Petitioners

treated this repudiation as an absolute and complete breach

*A more typical “tongue in the cheek” attitude by a wealthy insurance

company defies one’s imagination,

10

of contract, rescinded and sued for damages, 1. e. the re-

covery of their premiums.

The Court of Appeals held that petitioners’ complaints,

alleging the foregoing facts, each failed to state a claim,

because each ‘‘complaint discloses no facts which enables

us to determine the excess of the premiums paid over the

benefits received’? (R. 30).

Thus, the Court of Appeals has decided, even though re-

spondent advised petitioners that it never considered peti-

tioners the owners of the policies, that petitioners do not

have and never did have absolute assignments of the

policies, and that respondent considers the assignments to

petitioners as collateral only (R. 3, 11), that there was no

anticipatory breach or breach altogether which would war-

rant a return of the premiums paid by petitioners, notwith-

standing the payment of such premiums by petitioners ox

the express understanding, agreement and representation

of respondent that such assignments were absolute and

would vest absolute ownership of the policies in question i

the petitioners.

In making that decision, the Court of Appeals has decided

a question of general importance affecting millions of policy

holders, which has not been, but should be, settled by this

Court.

As this case involves an ‘‘unqualified refusal’? to perform

the original contract entered into between petitioners and

respondent or a refusal ‘‘substantially to perform accord.

ing to the terms of his (its) obligation,’’ it falls in the field

of law specifically left open as undecided, for future deci-

sion by this Court in the cases of Mobley v. N. Y. Life Ins.

(o., 295 U. S. 632, 638, 639 and N. Y. Life Ins. Co. v. Viglas,

297 U.S. 672, 678, 681.

But this Court has defined ‘‘an anticipatory breach’? as

‘‘one committed before the time has come when there is a

ated

11

present duty to perform’’ and ‘‘it is the outeome of words

or acts evincing an intention to refuse performance in the

future’? (New York Life Ins. Co. v. Viglas, supra, p. 681)

and we submit that the admitted facts here bring this case

within such definition.

The questions here presented warrant certiorari, particu-

larly when considered in connection with a conflict of deei-

sions in the Federal courts, on the important subject of life

insurance, in which millions of citizens and numerous insur-

ance companies are interested.

Mobley v. N.Y. Life Ins. Co., 295 U.S. 632, 633, 634.

N.Y. Life Ins. Co. v. Viglas, 297 U.S. 672, 676.

The erroneous holding that petitioners were not entitled

to recover the premiums paid by them to respondent on re-

spondent’s absolute repudiation of the contract here in-

volved, is contrary to the great weight of the authorities in

this country. As the questions here involved are of sub-

stance, and are of general importance, we submit that the

public interest will be promoted by their prompt settlement

in this Court.

* Thompson v. New York Life Ins. Cc., 28 Pae. 628, 634, 635, 21 Or.

466; Ballou, et al. v. Billings, 136 Mass. 307, 309; Van Werden v. Equitable

Life Assur. Society, 68 N. W. 892, 895 (Iowa); McKee v. Phoenix In-

surance Co., 28 Mo. 383, 386; Alabama Life Insurance Company v. Gar-

many, 74 Ga. 51, 58, 59; Union Central Life Insurance Co. vy. Pottkor 33

Ohio 459, 466, 467, 31 Am. Rep. 555; Life & Casualty Ins. Co. v. Womack,

3S. E. 2nd 791, 793 (Ga.); Eminent Household of Columbian Woodmen vy.

Bryant, 200 S. BE. 321, 324 (Ga.); Life & Casualty Ins. Co. vy. Baker, 79

S. W. 2d 36, 37 (Tenn.); National Life d Accident Ins. Co. v. Hamilton.

98S. W. 2d 107, 108 (Tenn.); Mutual Relief Ass'n. v. Ray, 292 8. W.

396, 402 (Ark.); Security Life Ins. Co. vy. Matthews, 12 S. W. 2d 865,

866 (Ark.); Pierce v. Liberty Life Ins. Co., 242 Pae. 133, 134 (Kan.);

Industrial Life & Health Ins. Co. v. Thomas, 159 S. E. 885 (Ga.); Bitumi-

nous Casualty Eachange Vv. Ford Elkhorn Coal Co., 48 8S. W. 2d 1057,

1058 (Ky.); American Life Insurance Co. v. MeAden, 109 Pa. 399, 404,

405; Erwin vy. World Mut. Health & Accident Ins. Se 186 Atl. 260, 261

(Pa.) ; Harwood y. Security Mut. Life Ins. Co., 161 N. B. 589, 592 ( Mass.) ;

Brough v. Presidential Fire d& Marine Ins. Co.., ort So. 895, 899 (La.).

12

I

THE COURT OF APPEALS HAS RENDERED A DECISION

IN CONFLICT WITH FIVE DECISIONS OF OTHER CIR-

CUIT COURTS OF APPEAL ON THE SAME MATTER

In this case, petitioners sought an arrangement with re-

spondent under which petitioners would become the absolute

owners of life insurance policies on their debtor, Richard-

son. On the express representation of the respondent that

it would recognize an absolute assignment to petitioners of

such life insurance policies, if taken out by Richardson and

payable to his estate, petitioners had Richardson apply for

such policies and thereafter, on an absolute assigmment

form supplied by respondent, had Richardson absolutely

assign the policies to petitioners. In reliance upon the ex-

press agreement existing witli respect to this arrangement,

vesting petitioners with absolute ownership of the policies,

petitioners paid premiums for over eight years.

Then respondent advised petitioners that it never recog:

nized the original arrangement as vesting ownership of the

policies in petitioners and that it did not now and would

never recognize such ownership.” On the occasion of this

repudiation and renunciation, respondent took the position

that the real owner of the policies was Richardson or his

estate, as the policies were collateral only, to secure peti-

tioners’ debts. We say such facts constitute a renuncia-

tion of the original agreement, an absolute repudiation, or

a breach altogether of that agreement by respondent. On

such facts, the court below refused to treat the action of the

respondent as an intention to refuse to perform the original

agreement or a complete repudiation of that agreement, and

ruled that petitioners could not recover back the premiums

5 Such a final statement repudiating the contract ab initio should be in

law and effect the same as a misrepresentation of a material fact, which

would preclude a “meeting of the minds,” and would afford petitioners

the right of rescission. Smith v. Richards, 13 Pet. 26, 38 U. S, 26.

a —

13

paid. That conclusion conflicts with five other decisions in

the Cireuit Courts of Appeal, which we will now consider.

In treating a similar refusal on the part of an insurance

company as a renunciation of a policy of insurance, the

Court of Appeals for the Third Circuit in the case of Su-

preme Couneil A. L. HW. v. Black, 123 F. 650, cert. den. 191

U.

S. 068, held (pp. 652, 653) :

,

In Roehm v. Horst, 178 U.S. 1, 13, 20 Sup. Ct. 780

44 L. Hd. 993, the Supreme Court of the United States,

upon a review of the cases, American and Knelish,

relating to anticipatory bre: ches of an executory con-

tract by a refusal on the part of one party to it to per-

form it, approved as reasonable the rule laid down in

Hochster v. De La Tour, 2 El. & Bl. 678, namely, that a

party to an executory agreement may, be fore the time

for executing it, bre: ik the agreement either by disabling

himself from fulfilling it or by renouncing the contract,

and that an action will lie for such breach before the

time for the fulfillment of the agreement. In deliver-

ing the opinion of the Supreme Court, Chief Justice

K — quoted with approval what was said in John-

stone v. Milling, L. R. 16 Q. B. Div. 460, 467, by Lord

Esher, "Maar of the Rolls, who put the pr inciple thus:

When one party assumes to renounce the con-

tract, that is, by anticipation refuses to perform

it, he thereby, so far as he is concerned, declares

his intention then and there to rescind the contract.

Such a renunciation does not of course amount to a

rescission of the contract because one party to a

contract cannot by himself rescind it ; but by wrong-

fully making such a renunciation of the contract

he entitles the other party, if he pleases, to agree

to the contract being put an end to, subject to the

retention by him of his right to bring an action in

respect of such wrongful rescission. The other

party may adopt such renunciation of the contract

by so acting upon it as to declare that he too

treats the contract as at an end, except for the

14

purpose of bringing an action upon it for the dam-

ages sustained by him in consequence of such

renunciation.

We see no reason why this principle is not applicable

to the present case. The renunciation by the defendant

of its insurance contract was most clearly manifested,

first, by the adoption of the amended by-law, and then

by its subsequent course of conduct in putting the

amended by-law into effect and undertaking to reduce

Black’s insurance. To escape the consequences of its

deliberate and unequivocal repudiation of the contract,

the defendant, when sued by Black, cannot be heard to

assert its inability to annul the contract. Poehin vy.

Horst, supra; Moorhead vy. Fry, 24 Pa. 37. In the

latter case the court said:

It will not do to aver the inability of Nelson to

set aside the contract as a reason why the attempt

to do so will not authorize Fry to treat it as

rescinded and recover for his labor upon a quantum

meruit.

In Ballou et al v. Billings, 136 Mass. 307, 309, it was

held that if one party to a contract, which has been

partly performed by payment of money by the other

party, totally repudiates it when the other party is not

in default, the latter may rescind the contract, and main-

tain an action to recover back the money paid by him.

The court there pointed out that the defendants derived

their right to keep the money only from the contract

which they had repudiated, and added:

Rescission, or avoidance properly so called, an-

nihilates the contract, and puts the parties in the

same position as if it had never existed.

The defendant in the case before us having wrong:

fully renounced its contract, we think that, upon prin-

ciple as well as upon authority, Black had the option to

treat the contract as rescinded, and the right to sue

immediately to recover back the moneys he had paid on

the faith of the contract.

* * * * * * *

15

According to the clear weight of authority, if an

insurance company wrongfully cancels a policy, or

otherwise wrongfuly renounces the contract, the in-

sured may, at his election, treat the contract as re-

scinded, and recover back all the premiums he has paid.

Braswell v. The American Life Insurance Co., 75 N. €.

8; McKee v. Phoenix Life Insurance Co., 28 Mo. 383,

7) Am. Dee. 129; McCall v. Same, 9 W. Va. 237, 27 Am.

Rep. 558; True v. Bankers’ Life Association. 78 Wis.

267, 47 N. W. 520; Van Werden vy. Assurance Society,

(8 Wis. 267, 47 N. W. 520; Van Werden vy. Assurance

Socicty, 99 Iowa, 621, 68 N. W. 892: The Union Central

Life Insurance Co. v. Pottkor. 33 Ohio, 459, 466, 31

Am. Rep. 555.

To the same effect is an earlier and two later decisions

of the Third Cireuit Court of Appeals:

Black v. Supreme Council, American Legion of Honor,

120 F. 580,

Supreme Council, A. L. Hoy. Daix, 130 F. 101,

Michaelsen v. Security Mut. Life Ins. Co., 154 F. 506,

cert. den. 207 U.S. 58s.

In the recent case of Williamson v. Mutual Benefit Health

and Accident Ass'n., 100 F. 2d 264, the Court of Appeals

for the Fifth Cireuit held that a refusal to perform a eon-

tract ‘tin any event,’? by an insurance company, gave

a good cause of action for anticipatory breach, authorizing

the recovery of the entire amount caused by the breach. Ae-

cordingly, the Cireuit Court reversed the action of the Dis-

trict Court in dismissing the complaint there involved,

stating the applicable rule to be (p. 264) :

It is the law that where there is a repudiation of the

contract, one may sue for an anticipatory breach of

the same, and recover, if he ean, the entire amount for

said breach in one lump sum. Therefore, the question

presented by this appeal is whether or not appellant's

16

petition states a cause of action for anticipatory breach

of the contract.

In the Williamson case, it was vigorously argued (see

dissenting opinion) that the case was controlled by this

Court’s decisions in the cases of Mobley v. N. Y. Life Ins.

Co., 295 U. 8S. 632 and N. Y. Life Ins. Co. v. Viglas, 297 U.S.

672, but the Fifth Cireuit Court of Appeals took the view

that those cases were not controlling because the William-

son ease involved an anticipatory breach, which is in the

field of law, we submit, that this Court specifically left

open for future decision in both the Mobley and Viglas de-

cisions.

The decision below conflicts with the foregoing decisions

in the Third and Fifth Cireuit Courts of Appeal.

Moreover the decision below also conflicts with what is

eenerally considered to be the majority rule, in this country

and Eneland, which is that ‘‘the insured may recover as

damages the amount of premiums paid or premiums and

interest, where there has been a wrongful repudiation of

the contract by the insurer, and the insured has elected to

reseind the contract rather than have it enforeed’’.

An exhausive review of the authorities on this point

was made by District Judge Cushman in the case of Davies

v. Sun Life Assur. Co., 2 F. Supp. 955, and in the course of

the opinion the District Court pointed out (pp. 957, 958) :

Although there is no doubt that the wrongful refusal

of an insurance company to carry out its contract of

insurance gives a right of action to the injured party

for the damages sustained by reason of such breach or

repudiation of the contract, there does seem to be an

irreconcilable conflict of authority as to the amount of

recovery, or measure of damages, for the wrongful can-

celation, repudiation, or termination of the contract of

insurance by the insurer. In fact, there are well estab-

6 Vol. 7, Couch on Insuranee, Section 1870,

17

lished rules or lines of authority which are in direct

conflict, as well as divers variations from such rules.

Under the rule, which is sometimes spoken of as the

majority rule, the insured may recover as damages the

amount of premiums paid, or premiums and interest,

where there has been a wroneful repudiation of the con-

tract by the insurer, and the insured has elected to

rescind the contract, rather than have it enforeed. Sup-

port for this rule is found in those cases which hold

that the insured may recover premiums aud interest

without deduction for the risk while carried, as well as

in those which permit a recovery of premiums and inter-

est, without considering a deduction for the benefit de-

rived by the insured during the time that the policy was

in force; also, in those eases which have held that the

insured was entitled to recover the amount paid, with-

out deduction, and in which it is uncertain whether in-

terest was included, (cited to support the text: Men.

derson Vv. Supreme Council, A. L. WH. (C. C.) 120 F. 585;

Supreme Council, A. L. HW. vy. Black, 59 C.C. A. 414, 123

I, 650, affirming (C. C.) 120 F. 580, certiorari denied

in 191 U. S. 568, 48 L. Ed. 800, 24 S. Ct. 841) and in

those which, without considering the question of dedue-

tion for the risk carried, have reached a similar con-

clusion, (cited to support the text: Michaelsen vy. Se-

curity ML. Ins. Co., 83 C. C. A. 834, 154 F. 396, 12 Ann.

Cas. 57, writ of certiorari denied in 207 U.S. 588, 52 L.

Kd. 353, 28 S. Ct. 255). It has heen said that the rule

Which denies deduction on account of intermediate bene-

fits derived from the protection had during the existence

of the policy rests upon the well-established principle

that a party to an entire contract, who has partially

performed it, cannot, upon subsequently abandonine

it without fault upon the part of the other party, or his

consent thereto, receive credit for the part performed.

The conflict here invelved concerns a question of first

importance that has not been but should be settled promptly

by this Court in the public interest.

Mobley ve N.Y, Life Ins. Co., 295 U.S. 632, 633, 634.

18

iil

THE COURT OF APPEAL’S DECISION HAS NOT GIVEN

PROPER EFFECT TO AND CONFLICTS WITH THE AP-

PLICABLE DECISIONS OF THIS COURT

We submit that this case involves a complete repudiation

and breach of the agreement entered into between petl-

tioners and respondent and that that breach dates back, in

effect, to the inception of the contract. Respondent has

taken the position that it mever recognized the original

agreement and that it at the time of the repudiation did nol

and would not recognize the original agreement, coupled

witha flat refusal to recognize petitioners, under the assign-

ments here involved, as the absolute owners of the Rich-

ardson policies.

In such a situation, we say the court below erred in sus-

taining the dismissal of petitioners’ complaints for dam-

ages. In reaching that erroneous decision, we submit that

the court below misconstrued this Court’s opinions in the

eases of Mobley v. N. Y. Life Ins. Co., 295 U.S. 682 and

N. ¥. Life Ins. Co. v. Viglas, 997 U. S. 672, when it con-

cluded that those cases rendered it unnecessary ‘to con

sider the doctrine of anticipatory breach’’ (R. 28).

We say that the facts in this case clearly involve a repu-

diation by respondent and the refusal on the part of re-

spondent to recognize the contract existing between peti

tioners and respondent. As that repudiation occurred be-

fore the time for performance, it was clearly an anticipa-

tory breach or of such character in finality as would war-

rant petitioners in treating the contract as absolutely and

finally broken, authorized rescinding of the same and the

recovery of the petitioners’ damages, which, in such a

situation, would be at the very least the premiums paid by

petitioners, plus interest. This Court made it plain in the

Mobley case, that such cases as this your Honors left open

for future decision, and that nothing that was said in the

GEST To

M3

*

Fie

19

Mobley case was to be considered as decisive, particularly

in anticipatory breach and in complete repudiation cases.

Thus in the J/obley case, this Court held (p. 638) :

Repudiation by one party, to be sufficient in any case

to entitle the other to treat the contract as absolutely

and finally broken and to recover damages as upon

total breach, must at least amount to an unqualified

refusal or declaration of inability, substantially to per-

form according to the terms of his obligation. Roelan

e. Horst, V8 U.S. 1, 14, 15. Smoot’s Case, 15 Wall.

06, 49. Dingley v. Oller, WT USS. 490, 508. Kamel ev.

Missourt State Life lus, Co., 71 FL (2d) 921, 923.

As there was no evidence in the Mobley case that the

insurance company ‘disregarded or intended to break its

promises,’? this Court held (p. 639) :

In view of that fact, we need not, and therefore do

not, decide whether the doctrine of anticipatory breach

is applicable to the class of cases to which this one be-

longs.

In the Viglas case, a similar factual situation prevailed,

in that there was no showing of a breach so wilfull and

material? as to confer upon the other party the election to

treat the contract as broken, nor was there any showing

of words or acts evincing an intention to refuse perform

ance in the future. In view of that situation, this Court

held (p. 681):

We have refrained in what has been written from

developing the distinction between an anticipatory

breach and others. The line of division between the

two has not always been preserved with consistency or

“Here the breach was absolute, complete and final and in every sense

was wilful and material, thus conferring on petitioners the cleetion, which

Was here made, to treat the contract as broken, coupled with words and

acts evineing an absolute intention by respondent to refuse performance

in the future of its express and conceded contract with petitioners.

20

clearness. To blur it is prejudicial to accuracy of

thought as well as precision of terminology. Strictly

an anticipatory breach is one committed before the

time has come when there is a present duty of per-

formance. Roehm v. Horst, supra; Pollock on Con-

tracts, 9th ed. p. 295; Williston, Contracts, vol. 5, see.

1296 et seq., collecting the decisions. It is the outcome

of words or acts evineing an intention to refuse per-

formanee in the future. On the other hand, there are

times, as we have seen, when the breach of a present

duty, though only partial in its extension, may confer

upon the injured party. the privilege at his election to

deal with the contract as if broken altogether.

We submit, therefore, under the plain language of this

Court in the Mobley and Viglas cases that the questions in

volved in this case arising out of respondent's total breach

and absolute repudiation ab initio, in effect, of the contract

here involved, are open, have not been decided, and there

fore the opinion below did not vive proper effect to and

conflicts with the rulings in the Mobley and Viglas cases.

Further, the court below errencdusly buttressed its con-

tention that it need not consider the doctrine of anticipa-

tory breach or complete repudiation by holding (R. 28-2):

It is not necessary to consider the doctrine of antic

patory breach. An insurance contract is not a fixed

obligation to pay money at a future date. It is a con-

tract to give continuous insurance protection for: the

period covered by the premiums. In the ease of a

short term policy the chances are that the liability to

_ pay money will never arise while the policy is in foree.

Even a life policy is not a fixed obligation to pay at

some future date which is undetermined. Tt is a series

of contingent obligations to pay if death occurs during

the year covered by each successive premium, There-

fore, when the defendant disclaimed liability it com-

mitted an immediate, not an anticipatory, breach otf

its contract to furnish insurance protection.

;

i

21

The holding that a poliey of life insurance is a series of

contingent obligations to pay, if death oceurs during the

year covered by an annual premium, is in direet conflict

with the decisions of this Court construing the nature and

character of life insurance policies. The contrary posi-

tion of this Court is clearly stated in the case of New York

Life Ins. Co. vy. Statham, 93 U.S. 24, 30:

We agree with the court below, that the contract is

not an assurance for a single year, with a privilege of

renewal from year to year by paying the annual

premium, but that it is an entire contract of assurance

for life, subject to discontinuance and forfeiture for

hon-payinent of any of the stipulated premiums. Such

is the form of the contract, and such is its character. 1

has been contended that the payment of each preminun

ix the consideration for insurance during the next fol

lowing year,-—as in fire policies. But the position is

untenable. It often happens that the assured pays the

entire premium in advance, or in five, ten, or twenty

annual instalments. Such instalments are clearly not

intended as the consideration for the respective vears

in which they are paid; for, after they are all paid, the

poliey stands good for the balance of the life insured,

Without any further payment. Each instalment is, in

fact, part consideration of the entire insurance for life,

It is the same thing, where the annual premiums are

spread over the whole life. The value of assurance for

one year of a man’s life when he is voung, strong, and

healthy, is manifestly not the same as when he is old

and decrepit. There is no proper relation between the

annual premium and the risk of assurance for the vear

in which it is paid. This idea of assurance from year

to vear is the suggestion of ingenious counsel. The an

nual premiums are an annuity, the present value of

Which is caleulated to correspond with the present value

of the amount assured, a reasonable percentage being

added to the premiums to cover expenses and con-

tingencies. The whole premiums are balanced against

the whole insurance.

22

In view of the contrary holding of this Court, it was

error for the court below to conclude that the absolute dis-

claimer of liability and wilful breach ab initio of respondent

corporation was but an immediate and partial breach,

as distinguished from a repudiation, because it occurred

within a year covered by an annual premium. It is per-

feetly plain that the theory of the court below that an abso-

lute renunciation in such a situation is immediate, partial

only and is not anticipatory or a breach ‘‘altogether’’ is

completely answered by the Statham case and by this

Court’s rulings in Roehm vy. Horst, 178 U.S. 1, 14, 15 and

N.Y. Life Ins. Co. v. Viglas, 297 U.S. 672.

On the precise point, this Court made it plain in the

Viglas case (p. 681), that ‘‘an anticipatory breach is one

committed before the time has come when there is a present

duty of performance’’ and ‘‘it is the outcome of words or

acts evineing an intention to refuse performance in the

future.’’

As respondent in this case concededly committed a breach

before the time when there was present a duty of perform-

ance and by its words and acts evinced an intention to re-

fuse performance in the future, on the basis of a conceded

contract, and at that time further stated that it never recog-

nized the original contract (thus relating repudiation back to

the time each policy issued), it follows that the breach here

constitutes an anticiaptory breach, or such a breach as

would justify an election by the injured petitioners to treat

the contract as broken ‘‘altogether’’ and the recovery of the

premiums paid by petitioners, and interest.

Moreover, as respondent by its wilful repudiation first

breached ‘‘altogether’’ the conceded contract here involved,

the rule announced by this Court in the case of Central

Trust Co. v. Chicago Auditorium, 240 U. 8. 581 is ap-

plicable, That rule is (p. 589):

23

It is no longer open to question in this Court that, as

a rule, where a party bound by an executory contract

repudiates his obligations or disables himself from

performing them before the time for performance, the

promisee has the option to treat the contract as ended,

so far as further performance is concerned, and main-

tain an action at once for the damages occasioned by

such anticipatory breach.

In the Central Trust Co. case, this Court further held

(p. 989) that the stated rule is applicable to contracts of

life insurance,

Accordingly, we submit in all earnestness that the de-

cisions below holding erroneously that petitioners’ com-

plaints should be dismissed for ‘failure to state a claim’’,

do not give proper effect to and conflict with the applicable

decisions of this Court. Such a situation warrants cer-

tiorari. N.Y. Life Ins. Co. v. Viglas, 297 U.S. 672, 676.

CONCLUSION

Wuereror®, petitioners respectfully pray in this petition

that this Court grant writs of certiorari and bring before

this Court the decision and judgments of the United States

Court of Appeals for the District of Columbia.

Seru W. Ricwarpson,

Aurons B, Lanna,

Raymonp C. Cusnwa,

Warren E. Macer,

Attorneys for Petitioners,

Washington, D. C.

Of Counsel:

Davies, Ricuserc, Breese, Busick & Ricuarpson,

Macer, Brepy & McGovern,

Washington, D.C.

(1459)